Announcement of Malawi to Receive World Bank Loans for Structural Adjustment and Technical Assistance on June 29, 1981

. · fOR IMMEDIATE RElEASE . • world Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 81/126 June 29, 1981 MALAWI TO RECEIVE WORLD BANK LOANS FOR STRUCTURAL ADJUSTMENT AND TECHNICAL ASSISTANCE The World Bank has approved a total of $46 million in loans to Malawi for a pro- gram of structural adjustment of the country's economy and a technical assistance proj- ect. A $45 mill ion loan will provide support for the government's program of economic recovery. This program is designed to diversify the export base, encourage efficient import substitution, adjust incentives and income policies, improve the financial per- formance of the public sector, and strengthen the government's economic planning and mon_itoring capabi 1 ity. The proceeds of the loan will be disbursed quickly and will be used for the pur- chase of essential imports. The disbursement will be made in two tranches, $25 million initially, and $20 million after a review of progress in October 1981. The Foreign Exchange Control Department of the Reserve Bank will administer and process applica- • tions for imports to be financed by this loan. The Malawian Kwacha equivalent funds generated by the withdrawal from the loan account will be credited to a special account in the Reserve Bank of Malawi. They will be used for development purposes in the central government's budget. The government's medium-term program for economic recovery (1981/82-1985/86) has been formulated to achieve a 4.8% growth rate in the gross domestic product and to increase diversification of foreign exchange earnings through the development of new smallholder and estate crops, the faster export of smallholder crops, and the development of forestry and agrobusiness industries. It also aims to improve the financial performance of public enterprises and the public budget to reduce to man- ageable levels the dependence on external resources and domestic borrowings and to improve foreign exchange reserves. Malawi has had a good record of ~conomic performance since independence in 1967, but its balance of payments has deteriorated in the last three years. Terms of trade have fallen for its two major exports, tobacco and tea. The cost of im- ports, particularly fuel and intermediate and capital goods, has escalated as has also the cost of transport of exports and imports. The loan will assist the govern- ment in its structural adjustment program designed to revitalize Malawi 1 s economy. A $1 mill ion loan to complement the structural adjustment loan will help fi- nance consultant services for studies of the livestock, meat, and dairy industries. The Malawi Development Corporation's financial position and export marketing capa- bilities will also be examined and strengthened. Other studies will be carried out • as needed to support th~ structural adjus~ment program . Both World Bank loans to Malawi are for 20 years, including five years of grace, with interest at 9.6% per year. NOTE: Money figures are expressed in U.S. dollar equivalents.